The Goodyear Tire & Rubber Company · NASDAQ:GT
The Goodyear Tire & Rubber — Q2 2012 Earnings Presentation
35 slides from The Goodyear Tire & Rubber's earnings presentation, Jul 31, 2012
Slide 1: Second Quarter 2012 Conference Call
Second Quarter 2012 Conference Call July 31, 2012
Slide 2: Forward-Looking Statements
Forward-Looking Statements Certain information contained in this presentation constitutes forward-looking statements for purposes of the safe harbor provisions of The Private Securities Litigation Reform Act of 1995. There are a variety of factors, many of which are beyond our control, that affect o
Slide 3: Second Quarter Summary
Second Quarter Summary + - • Record North America earnings, • EMEA environment despite weak volumes deteriorating further • Record Asia earnings, despite • Channel destocking start-up costs • Global volume weakness • Refinancing actions & U.S. • Foreign exchange significantly pension stabilization i
Slide 4: Historical First Half Trend
Historical First Half Trend Tire Unit Volume (in millions) Segment Operating Margin (a) 100 12% 95 8% 89.7 6.4% 90 5.9% 87.8 5.2% 85 4% 82.2 80 78.4 0% 75 (2.0)% 70 (4)% H1 09 H1 10 H1 11 H1 12 H1 09 H1 10 H1 11 H1 12 Goodyear has enhanced earnings power & consistency a) Segment Operating Income and
Slide 5: Successful NAT Business Transformation
Successful NAT Business Transformation… Operational Market-back Target Profitable Excellence Innovation Excellence Market Segments • Reduced high-cost • Best products in • Profitable choices footprint the industry – Branded vs. • Reduced benefits cost • Strong cadence private label through VEBA/plan
Slide 6: North America Industry Fundamentals
North America Industry Fundamentals N.A. Consumer Replacement Industry (y/y) U.S. Consumer Replacement Industry Industry sales from manufacturers to dealers is weak… (Millions of units) …and sales remain well below long-term trend demand levels--indicating pent-up demand is building… Source: Rubber
Slide 7: EMEA Update
EMEA Update • Weak industry volumes - Including markets that were strong in Q1 • Reducing production schedules • Focused on cost • Economic challenges likely to persist Further deterioration in industry volumes; responding with cost and cash actions 7
Slide 8: EU Tire Labeling
EU Tire Labeling Goodyear EfficientGrip AA* • “A” for fuel efficiency EfficientGrip AA • “A” for traction (wet grip) achieves highest possible ratings • Breakthrough technology for for fuel efficiency meeting fuel efficiency and and wet grip improved wet braking performance Voluntary Mandatory Label
Slide 9: Strategy Roadmap
Strategy Roadmap Where We Are Executing Plan NAT Profitable Innovation Leader Investing to Grow Record Earnings Balance Sheet Improving Industry Key Strategies Key How To’s 1. North America: Profitability 1. Market-Back Innovation Excellence 2. Target Profitable Market Segments 2. Asia:
Slide 10: Statement of Operations
Second Quarter 2012 Statement of Operations (In millions, except Margin and EPS) Second Quarter 2012 2011 Change Units 39.2 42.9 (8.6)% Net Sales $5,150 $5,620 (8.4)% Gross Margin 19.6% 18.6% 1.0 pts SAG $697 $753 (7.4)% Segment Operating Income(a) $336 $382 (12.0)% Segment Operating Margin(a) 6.5%
Slide 11: Segment Operating Results
Second Quarter 2012 Segment Operating Results Q2 2011 1. Raw material variance of $238 million excludes raw material cost saving measures of $67 million, which is included in Cost Savings above. 2. Estimated impact of inflation (wages, utilities, energy, transportation and other). 3. Increase in NAT
Slide 12: Balance Sheet
Second Quarter 2012 Balance Sheet ($ in millions) June 30, March 31, December 31, June 30, 2012 2012 2011 2011 Cash and cash equivalents $ 2,156 $ 2,083 $ 2,772 $ 1,804 Accounts receivable 3,174 3,530 2,849 3,539 Inventories 3,940 3,969 3,856 4,032 Accounts payable - trade (3,324) (3,571) (3,668) (3
Slide 13: Cash Flow
Cash Flow ($ in millions) Three Months Trailing Twelve Ended Months Ended June 30, 2012 June 30, 2012 Net Income $103 $348 Depreciation & Amortization 167 678 Working Capital (1) (162) Pension Expense 74 284 Other 90 422 Capital Expenditures (214) (1,001) Free Cash Flow from Operations* $219 $569 M
Slide 14: Pension Update
Pension Update Global Unfunded Obligations (1) (3) $3,500 $3,097 $3,000 $2,748 $2,715 $2,549 $2,625 $ in millions $2,500 $2,225 $2,000 $1,500 $1,000 $500 $0 2008 2009 2010 2011 2012E 2013E U.S. DR 6.50% 5.75% 5.20% 4.52% 4.52% 4.52% Domestic International Global Pension Expense (1) (3) U.S. Sensitiv
Slide 15: Segment Results
Second Quarter 2012 Segment Results (In millions) North American Tire Europe, Middle East and Africa Tire 2012 2011 Change 2012 2011 Change Units 15.4 15.7 (1.4%) Units 14.2 17.0 (16.7%) Net Sales $2,451 $2,411 1.7% Net Sales $1,596 $1,943 (17.9%) Operating Income $188 $137 37.2% Operating Income $1
Slide 16: 2012 Full Year Industry Outlook
2012 Full Year Industry Outlook July Full Year 2012 April Full Year 2012 Guidance Guidance NAT: (1)% to (3)% NAT: (1)% to (3)% Consumer Replacement EMEA: (8)% to (10)% EMEA: (3)% to (5)% Consumer NAT: +5% to +10% NAT: +2% to +7% OE EMEA: (5)% to (10)% EMEA: (5)% to (9)% Commercial NAT: (5)% to (10)%
Slide 17: 2012 Key Segment Operating Income Drivers
2012 Key Segment Operating Income Drivers Driver Trend Comments Global Tire Unit Volume ~ (5) – (7)% - • Lower EMEA industry demand • Lower N.A. commercial replacement demand • 2012 raw material cost increase of ~7% Raw Materials + (assumes spot prices remain at recent levels) • Q3 ~ flat year-over-
Slide 18: Financial Assumptions
2012 Outlook Financial Assumptions Assumption Trend Comments Interest Expense + • $350 - $370 million Income tax - • 25 - 30% of International Segment Operating Income Global Pension • $275 - $325 mm Expense • $550 - $600 mm Cash Contribution Working Capital • Neither a source nor a use Capital Expe
Slide 19: Investing in the Business
Investing in the Business ($ in millions) 2013 SOI Target $ 1,600 Corporate Other ~ (150) EBIT ~ 1,450 Depreciation ~ 750 EBITDA ~ 2,200 Pension Expense ~ 275 2013 EBITDAP ~ $2,475 Balance Sheet /Profit Growth Drivers Interest Expense ~$375 Pension Funding to reduce Unfunded ~ $375 Taxes Paid ~ $250
Slide 20: Achieving $1.6 Billion Segment Operating Income in 2013
Achieving $1.6 Billion Segment Operating Income in 2013 Key Drivers – March 2011 Status Update NAT ~5% SOI margin NAT on path to achieve a year ahead of plan International segment operating income Strong growth in Asia, LAT improving & EMEA facing a returning to historical levels challenging eco
Slide 21: Appendix
Appendix
Slide 22: Tire Unit & Sales Summary
Second Quarter 2012 Tire Unit & Sales Summary (in millions) 2012 Q2 Sales = $5,150 Q2 Unit/Sales Mix 2012 2011 % Change Consumer Consumer Units 35.5 38.6 (8.1%) Commercial 53% 20% Sales $2,709 $2,873 (5.7%) Other 14% Commercial Retail 7% Units 3.2 3.7 (13.9%) Sales $1,038 $1,159 (10.4%) Chemical 6%
Slide 23: Tire Unit & Sales Summary
Full Year 2011 Tire Unit & Sales Summary (in millions) 2011 Sales = $22,767 2011 Unit/Sales Mix 2011 2010 % Change Consumer Consumer Commercial Units 163.6 164.4 (0.5%) 53% 20% Sales $12,065 $10,343 16.6% Other 12% Retail Commercial 8% Units 14.8 14.0 5.5% Sales $4,588 $3,501 31.0% Chemical 7% 23
Slide 24: Price/Mix Improvements
Price/Mix Improvements Price/Mix vs. Raw Materials(a) ($ in millions) $2,356 $1,822(b) $942 $838 $712 $689 $639 $549 $591(c) $195 $207 ($115) 2007 2008 2009 2010 2011 Through Through June June 30,30, 2012 2012 Price/Mix Raw Materials (a) Reflects impact on Segment Operating Income. Raw Materials inc
Slide 25: 2012 Cash Flow
2012 Cash Flow ($ in millions) Six Months Ended June 30, June 30, 2012 2011 Net Income $111 $180 Depreciation and amortization(a) 397 398 Working capital(b) (768) (1,256) Pension contributions and direct payments (227) (106) Other (including compensation and benefits) 36 115 Total Cash Flows from Op
Slide 26: Maturity Schedule
Second Quarter 2012 Maturity Schedule ($ in millions) Undrawn Credit Lines Funded Debt $2,000(c) $1,511 $1,259 $849 $571(a) $507(b) $393 $395 $292 2012 2013 2014 2015 2016 2017 2018 2019 2020 ≥2021 2021 Note: Based on June 30, 2012 balance sheet values and excludes notes payable, capital leases and
Slide 27: Liquidity Profile
Second Quarter 2012 Liquidity Profile Liquidity Profile ($ in billions) $4.8(a) Pan European Securitization(b) Available Credit Lines (c) Cash & Equivalents(d) $1 billion required for operations (a) Total liquidity comprised of $2,156 million cash and cash equivalents, $2,496 million of unused avail
Slide 28: Second Quarter Significant Items
Second Quarter Significant Items (after tax and minority interest) 2012 (See next page) • Rationalizations, asset write-offs and accelerated depreciation, $25 million (9 cents per share) • Debt financing fees related to refinancing of $3.2 billion in credit facilities, $24 million (9 cents per share
Slide 29: Second Quarter Significant Items
Second Quarter Significant Items (after taxes and minority interest) Second Quarter 2012 ($ in millions, except EPS) Significant Items Rationalizations, Debt Financing Fees Cost Related to Asset Write-offs & Related to the Charges for Tornado Damage in Accelerated Refinancing of $3.2 Labor Claims 20
Slide 30: Mandatory Convertible Preferred Stock
Mandatory Convertible Preferred Stock Common Share Impact Upon Conversion Common Shares Common Share Common Conversion Issuable upon Price Share Price Rate Conversion % Dilution* Appreciation** $14.57 3.4317 34,317,000 14.0% 0% and below $15.00 3.3333 33,333,333 13.6% 3% $16.00 3.1250 31,250,000 12.
Slide 31: Reconciliation for Segment Operating Income / Margin
Reconciliation for Segment Operating Income / Margin ($ in millions) Three Months Ended Six Months Ended June 30, June 30, 2012 2011 2009 2010 2011 2012 Total Segment Operating Income $ 336 $ 382 $ (152) $ 459 $ 709 $ 628 Rationalizations (26) (46) (191) (8) (55) (41) Interest expense (83) (81) (143
Slide 32: Reconciliation for Total Debt and Net Debt
Reconciliation for Total Debt and Net Debt ($ in millions) June 30, March 31, December 31, June 30, 2012 2012 2011 2011 Long term debt and capital leases $ 5,395 $ 5,186 $ 4,789 $ 4,786 Notes payable and overdrafts 168 291 256 261 Long term debt and capital leases due within one year 107 154 156 257
Slide 33: Reconciliation for Free Cash Flow from Operations
Reconciliation for Free Cash Flow from Operations The amounts below are calculated from the consolidated Statements of Cash Flows except for pension expense which is the net periodic pension cost as reported in the pension-related note in the Notes to Consolidated Financial Statements. Trailing Twel
Slide 34: Second Quarter 2012 Debt
Second Quarter 2012 Debt ($ in millions) June 30, March 31, December 31, 2012 2012 2011 Notes Payable: Notes Payable and Overdrafts $ 168 $ 291 $ 256 Long-Term Debt: Notes: 10.5% due 2016 $ - $ - 631 6.75% Euro Notes due 2019 317 334 324 8.25% due 2020 994 994 994 8.75% due 2020 265 265 264 7% due 2
Slide 35: GOODS YEAR
GOODS YEAR
The Goodyear Tire & Rubber Company — Q2 2012 Earnings Presentation on 6ix